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Show I STATE TAX MEN AND BANKERS IN ACCORD Months of Negotiation Lead tot . Agreement on Changes Broadening Broad-ening Method of State or Local Taxation of National Banks. NEW YORK. Months of conference and negotiation between an American Bankers Association special commutes . and the Committee of the Association of States on Bank Taxation have resulted re-sulted in an agreement on a form of amendment to the Federal statute dealing with state or local taxation of national banks that "maintains the Integrity In-tegrity of the protective principles of the section and is satisfactory to the commissioners' committee," says the American Bankers Association Journal. Thomas B. Paton, the organization's General Counsel, in making the announcement an-nouncement says that previously proposed pro-posed amendments to the statute, which is known as Section 5219, have been opposed when it was felt their terms would enable any state to place banks in a tax class by themselves. "The law as It stands today," Mr. Paton says, "permits state or local taxation of national banks or their shareholders in one or the other of the four following forms: the shareholders share-holders upon their shares, a property prop-erty tax; the shareholders upon their dividends, a personal income tsx; the bank upon its net income; the bank according to or measured by lis net income. Only one form of tax can be imposed, except that the dividend tax may be combined with the third or fourth form if other corporations and shareholders are likewise taxed. "The conditions permitted are: the tax on shares must be at no greater rate than on other competing moneyed capital; the income tax on sharehold- , era must be at no greater rate than . , on net income from other moneyed capital; the tax on bank net income must be at no higher Tate than on other financial corporations nor the highest rates on mercantile and manufacturing manu-facturing corporations doing business within the state; the tax measured by not bank income is subject to tho same limitations as the tax on net income of the bank but may include entire net Income from all sources." States Seek Broader Law National banks and their shareholders sharehold-ers are taxed in different states under a diversity of systems, he says. The U. S. Supreme Court has held that the low millage rate on intangible personal person-al property is in violation of the present pres-ent law where it results fn national bank shares being taxed at a rate greater than that assessed upon competing com-peting moneyed capital. A number of states, unwilling to use the Income methods permitted, had the alternative alterna-tive of either repealing the Intangible tax laws or limiting taxation of national na-tional bank stores at the Intangible rate. Therefore they Bought a broadening broad-ening of the permissive provisions. Also, Mr. Paton points out, a Supreme Su-preme Court decision held a state's excise tax on corporations invalid where It included income from Federal and local government bonds in the excise ex-cise measure. This created doubt as to some state bank excise taxes. "Conferences have been held to reach some agreement which would protect the banks, satisfy the tax commissioners com-missioners and avoid a contest In Congress," Con-gress," Mr. Paton says. "From tho standpoint of the tax authorities, the main objectives have been an amendment amend-ment which would permit certain states to retain their low rate tax upon Intangibles and at the same time derive de-rive an adequate, but not excessive, revenue from national bank shares, and an amendment which would permit per-mit certain states to lax corporations on their net income, excluding income from tax-exempts, and at the same time derive the same revenue from the banks as heretofore. From tho standpoint of the banks, it has been deemed Imperative to maintain the protective principles of Section 5219. The Chsnges Agreed On "In the proposed amendment tho existing ex-isting provision permitting taxation of . bank shares no higher thnn the rote upon competing moneyed capital has been modified with respect to certain Intangible tax states only by a provision provi-sion under which, Instead of the moneyed capital limitation, the rate ahall not be greater than the rate upon the shares of other financial corporations, corpora-tions, nor upon tho net assets of individuals, indi-viduals, partnerships or associations employed In the banking, loan or investment in-vestment bualness, nor higher than the rate assessed upon mercantile, manufacturing and business rorporn-! rorporn-! tlnns with head office In the slate, i "Also an added fifth alternative pr-r-j missive method, designated as a fv-I fv-I rifle tax, permits a ptate, in place of ; an ad valorem tax on bank shares, to I add together total dividends paid the ) preceding yeBr and tho increase In : capital, surplus and undivided profit?, j Iors additions to capital or mjrplun ! paid In by stockholders, and to divide j this total by the number of share, j The state may tax the shares baped I upon this amount, tut not to exceed ' the rate on other corporations in fto-j fto-j portion to their net profits. "This method is designed for state." which have heretofore taxed national bankfl upon their entire net Income from all sources at a proportionate ( rate to that assessed upom business corporations. The amount which is the basis of the tax is the equivalent, of the entire net income from all sources, but being asse."sed against the shareholder upon his property in the shares and not a tax upon the bank, it is not open to the objection H an Indited tax on exempt income." |